Ecommerce Becoming the Trend of the Future

October 12, 2020 By iwano@_84 Off

It’s no secret that the retail industry has undergone one of the most drastic transformations throughout the pandemic. Companies within the field have seen ups and downs, but one branch of the retail space has seemingly only realized upside: eCommerce. But by how much did companies like Amazon, Wayfair, and Carvana really affect consumer spending?

While many mourned the loss of traditional brick & mortar outlets, the silver lining (especially as social distancing becomes the new normal) is the opportunity to shop for the same items in a more modern fashion. eCommerce delivers this new platform to consumers around the country, and has realized unprecedented success as “consumers have reduced spend at restaurants, bars, travel, concerts, etc.”

In their 4th annual eCommerce study, analysts at Cowen found that the sector “outsized growth of “+48% y/y in ’20,” and subsequently raised their total US eCommerce growth estimate by “~28-31% annually ’20-24 vs. prior est.” This growth rate upswing is attributed largely to an increase in “Consumables, Food & Bev, & Home,” as the coronavirus pandemic continues to create a retail foundation that helps online retailers succeed. In fact, the same analysts at Cowen expect “$1TN in eCommerce sales by ’22, two years earlier vs. our prior model,” and continue to boast their bullish ratings on companies such as Amazon and Carvana.

The number of stores closing across the US has continued to rise over the past few years. This trend has only accelerated in 2020 due to the global pandemic. COVID-19 has served as the main driver of eCommerce penetration. According to Cowen analysts, “ 2020 will represent the second consecutive year with elevated store closings, as we estimate >10,000 major chain closures in ’20, based on announcements through 3Q20, with more to come; (ii) Even before the pandemic, ’19 had seen >9,200 major chain store closures, vs. under 5,000 in ’18.”

In addition, the pandemic has nearly doubled the amount of US online grocery users from a year ago. The adoption of Online Grocery services has dramatically grown as consumers continue to practice social distancing. “32% of respondents indicating they had purchased groceries online in the past 30 days, vs. 18% in Aug ’19 and 15% in Aug ’18. We estimate eCommerce accounted for ~7.5% of US Grocery sales in ’19 vs. overall eCommerce penetration of 11.9%. We expect Grocery to surge to ~14.0% in ’20”, stated according to the analysts.

The overall trends point toward an even more optimistic future, as most have no qualms about eCommerce slowing down. We’ve yet to see the future of brick & mortar stores, but the coronavirus pandemic, coupled with the seamless online shopping experience may continue to cause issues with the traditional consumer experience, while online retail will likely transition to a first option.

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Disclosure: At the time of publication, we are long Amazon. We wrote this article ourselves, and it expresses our own opinions. We are not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.

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